Rangebound Wheat Markets?
Wheat markets finished the month of November on a topsy-turvy note, as the futures board showed a net decline over the past 30 days, while the cash markets continue to be largely rangebound. More broadly, wheat markets were the anomaly in a largely positive month, especially compared to other futures-traded crops, including corn (+5.3%), canola (+6.5%), and soybeans (+10.6%), which was the big winner.
Staying in the futures, it was a shortened-trading week for the wheat markets due to the U.S. Thanksgiving holiday on Thursday, November 26th.. Despite this, we saw prices on both the futures and cash boards improve noticeably when markets opened back up for a few hours on Friday, led by Chicago SRW wheat. Bringing it back to the farmgate, strong demand and these elevated futures are helping CPS wheat prices to trade, on average, nearly 20% better than a year ago. Higher corn prices have certainly helped pulled up the socks of wheat futures, and so, I’m moreso watching corn to see where CPS wheat prices go next.
That said, as seasonality seems to have been thrown out the window this year because of the amplified COVID-19-related buying spree, we could still see some higher values later this winter, but for now, cash prices seem to be rangebound (as the chart above shows). It’s a similar dynamic though for HRS wheat prices, as we saw the beginning of a 60¢, 3-month rally at this time a year ago. While it’s a not an exact science to compare one year to the next, we’re aware of the strength of exports and weather concerns at this time a year ago, both of which we’re seeing again today.
With 8.2 MMT of durum & non-durum wheat sailed through Week 16, exported Canadian wheat volumes are tracking 25% higher year-over-year. Now that we have gotten through the supply rush of Harvest 2020, durum prices seemed to have settled into the same range that we saw in the spring/summer, once COVID-19 lockdowns became permanent. However, it looks to be like durum exports are picking up the pace and trades seen this past week on the Combyne Ag Trading Network are reflecting strong, continued demand.
The one factor I remain uber-aware of though, is how high the likes of canola, flax, and pea prices have been trading on Combyne and elsewhere, and that is certainly buying 2021 acres. Not to say lots of wheat won’t get planted next spring in Canada, but my guess is that HRS wheat acres will be down, while we might see a bit more durum and low-protein wheat like CPS get drilled. This will likely be verified through some tighter ending stocks that many market analysts are expecting to see, but like most of 2020 has showed us, anything can happen.
President & CEO | FarmLead.com